(November 13, 2013) — Ray Dalio, CEO of Bridgewater Associates, openly supported the extension of the US Federal Reserve’s quantitative easing policy at the New York Times’ Dealbook Conference yesterday.
The hedge-fund tycoon said that despite its valiant efforts—and a “masterful job” done—in providing liquidity post-2008, further money printing was likely to be necessary.
“It’s working with consistently decreasing effect,” Dalio said. “It will work with even less effect.”
Referencing a video of a step-by-step guide to finance he posted in September, Dalio said rising asset prices will return an average of only 4% annually over the next decade—a factor that will further contribute to the Fed’s inability to raise interest rates for years.
This will then also negatively impact investors in the future and bring a pause on global economic growth.
“I think going forward, most investors are not going to be able to produce alpha,” Dalio said. “Alpha is a zero sum. It’s a very difficult game. I would say most investors would create a balanced portfolio against it”—a balance between equities, bonds, and cash to weather the thinning interest rates among them.
The legendary hedge fund manager was bearish on the state of the French economy—with debt rising faster than income and interest rates taking a dip, Dalio said debt service payments will inevitably increase. These will turn to hurt the French economy, widening its future credit spreads. The result? Quite possibly the next crisis, he said.
Dalio went on to attribute his success to daily meditations that create “equanimity” and said he would open Bridgewater again today if he had the chance.
Related content: Dalio: How the Economic Machine Works in 30 Minutes (and a Cartoon)